The
federal banking regulators have issued the attached press release announcing the issuance of
a joint interagency statement that provides comprehensive guidance on retail sales of nondeposit
investment products occurring on or from depository institution premises. The interagency
statement unifies the pronouncements issued by the banking agencies last year addressing various
aspects of retail sales programs involving mutual funds, annuities and other nondeposit investment
products. The press release summarizes the most pertinent aspects of the interagency
statement.

The
interagency statement, which is being distributed with this "SR" Letter, supersedes
our June 17, 1993 and June 6, 1991 "SR" Letters (SR 93-25 (FIS) and SR 91-14 (FIS),
respectively). Those "SR" Letters covered some, but not all, of the issues
addressed by the attached interagency statement.

The
interagency statement applies to all depository institutions, including state member banks,
and the U.S. branches and agencies of foreign banks under the Board's supervision. It
emphasizes the importance of adopting comprehensive policies and procedures governing sales
programs, and includes directions relating to the following matters: disclosure and advertising;
the use of identical and similar named products; the separation of sales programs; the training
and supervision of personnel; sales practices and suitability; and third party arrangements.

Due
to the importance of this matter, the attached press release and interagency statement should
be sent by your Reserve Bank to the chief executive officer of each bank holding company, state
member bank and U.S. branch and agency of a foreign bank in your District. A suggested
transmittal letter is attached.

Reserve
Banks should continue to review banking organizations' nondeposit investment product sales activities.
During the next examination or inspection of an institution engaging in such activities on its
premises, either directly or through a third party or an affiliate, the review process should,
at a minimum, include an assessment of whether the interagency statement is being followed,
particularly with regard to the nature and sufficiency of an institution's disclosures, the
separation of functions, and the training of personnel involved with the sales of mutual funds
and other nondeposit products.

A
Federal Reserve System task force is now being formed under the direction of James I. Garner,
Deputy Associate Director, to address examination and supervisory issues related to the sales
of nondeposit investment products by banking organizations supervised by the Federal Reserve. This
task force is developing examination guidelines and specific procedures that would be used by
Reserve Bank examiners during the course of their reviews. In the event you have
any questions about what interim steps should be taken pending the completion of the task force's
assignment, please contact Kevin J. Rochford, Senior Supervisory Financial Analyst, at (202) 452-2278.

In
the event you have any questions concerning the interagency statement, please contact Angela
Desmond, Senior Attorney, at (202) 452-3497, or Richard Ashton, Associate General Counsel,
at (202) 452-3750.

The
Board of Governors of the Federal Reserve System, along with the other federal banking regulators,
have issued the attached press release announcing the issuance of an interagency statement that
provides comprehensive guidance on retail sales of nondeposit investment products occurring
on or from depository institution premises. The interagency statement, which is included
with the press release, unifies the pronouncements issued by the banking agencies last year
addressing various aspects of retail sales programs involving mutual funds, annuities and other
nondeposit investment products.

The interagency statement applies to all depository institutions, including state member banks,
and the U.S. branches and agencies of foreign banks, supervised by the Federal Reserve. It emphasizes
the importance of adopting comprehensive policies and procedures governing sales programs, and
includes directions relating to the following matters:

disclosure and advertising

the use of identical and similar named products

the separation of sales programs

the training and supervision of personnel

sales practices and suitability

third party arrangements

The
interagency statement is effective immediately and should be reviewed by your management, supervisory,
and other personnel responsible for, or involved in, retail sales programs for nondeposit investment
products.

In
the event you have any questions concerning this matter, please contact ________________________________,
at _____________________, or, at the Board of Governors,
Richard Ashton, Associate General Counsel, at (202) 452-3750, or
Angela Desmond, Senior Attorney, at (202) 452-3497.